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Retail optimism returns after prolonged slump

By: Rachel Miller

Date: 26 November 2019

The six-month decline in UK retail sales ended in November, according to the latest quarterly CBI Distributive Trends survey.

Retailers reported broadly unchanged sales volumes in the year to November after six consecutive months of declining annual sales, according to the CBI. And they expect growth to return in the year to December, with their strongest expectations in seven months.

Business conditions are expected to remain stable over the next three months and total employment was broadly flat in the year to November, with the strongest growth in part time employment in five years counterbalanced by a further fall in full-time employment. However, orders placed with suppliers fell for the seventh consecutive month, and at a faster pace than in October.

"Retailers are entering the festive season with a bit of hope that sales will head up, with the strongest expectations in half a year," said Anna Leach, CBI deputy chief economist. "Actual sales have also stabilised and have nudged above average for the time of year. And employment has stopped falling after three years of decline."

The prospect of the reform of business rates is also giving rise to optimism, she added. "As the election period gets into full swing, retailers will welcome the prominence being given to fixing the broken business rates system. But it will be up to the next government to turn warm words into action."

On a more gloomy note, the findings show that retailers are, once again, planning to spend less on investment next year than they did this year. Other key findings of the CBI survey are:

38% of respondents reported that sales volumes were up on a year ago in November, while 41% said they were down, giving a balance of -3% - the highest balance in seven months;

Sales were seen as above average for the time of year to the greatest extent since April and sales are expected to improve further in December;

Average selling prices in the year to November grew at a similar pace to last quarter, with a slight easing expected next quarter;

However, annual internet sales eased to the slowest rate of growth since June, with a similar rate of growth expected next month.

Overall, the CBI findings show that retail business conditions are expected to remain stable over the quarter ahead, after a sharp weakening in expectations last quarter.